XML 49 R17.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Stock-Based Compensation
12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] Stock-Based Compensation
In 2013, OGE Energy adopted, and its shareholders approved, the Stock Incentive Plan. Under the Stock Incentive Plan, restricted stock, restricted stock units, stock options, stock appreciation rights and performance units may be granted to officers, directors and other key employees of OGE Energy and its subsidiaries. OGE Energy has authorized the issuance of up to 7,400,000 shares under the Stock Incentive Plan.
 
The following table summarizes OG&E's pre-tax compensation expense and related income tax benefit for the years ended December 31, 2019, 2018 and 2017 related to performance units and restricted stock units for OG&E employees.
Year Ended December 31 (In millions)
201920182017
Performance units:   
Total shareholder return$3.0  $2.8  $2.5  
Earnings per share1.5  1.8  0.5  
Total performance units4.5  4.6  3.0  
Restricted stock units0.4  —  —  
Total compensation expense$4.9  $4.6  $3.0  
Income tax benefit$1.3  $1.2  $1.2  

OGE Energy has issued new shares of common stock to satisfy restricted stock unit grants and payouts of earned performance units. In 2019, 2018 and 2017, there were 164,794 shares, 8,599 shares and 965 shares, respectively, of new common stock issued to OG&E's employees pursuant to OGE Energy's Stock Incentive Plan related to restricted stock unit grants and payouts of earned performance units.

Performance Units
 
Under the Stock Incentive Plan, OGE Energy has issued performance units which represent the value of one share of OGE Energy's common stock. The performance units provide for accelerated vesting if there is a change in control (as defined in the Stock Incentive Plan). Each performance unit is subject to forfeiture if the recipient terminates employment with OGE Energy or a subsidiary prior to the end of the primarily three-year award cycle for any reason other than death, disability or retirement. In the event of death, disability or retirement, a participant will receive a prorated payment based on such participant's number of full months of service during the award cycle, further adjusted based on the achievement of the performance goals during the award cycle. OG&E estimates expected forfeitures in accounting for performance unit compensation expense.

The performance units granted based on total shareholder return are contingently awarded and will be payable in shares of OGE Energy's common stock subject to the condition that the number of performance units, if any, earned by the employees upon the expiration of a primarily three-year award cycle (i.e., three-year cliff vesting period) is dependent on OGE Energy's total shareholder return ranking relative to a peer group of companies. The performance units granted based on earnings per share are contingently awarded and will be payable in shares of OGE Energy's common stock based on OGE Energy's earnings per share growth over a primarily three-year award cycle (i.e., three-year cliff vesting period) compared to a target set at the time of the grant by the Compensation Committee of OGE Energy's Board of Directors. All of these performance units are classified as equity in OGE Energy's Consolidated Balance Sheets. If there is no or only a partial payout for the performance units at the end of the award cycle, the unearned performance units are cancelled. Payout requires approval of the Compensation Committee of OGE Energy's Board of Directors. Payouts, if any, are all made in common stock and are considered made when the payout is approved by the Compensation Committee.
 
Performance Units – Total Shareholder Return

The fair value of the performance units based on total shareholder return was estimated on the grant date using a lattice-based valuation model that factors in information, including the expected dividend yield, expected price volatility, risk-free interest rate and the probable outcome of the market condition, over the expected life of the performance units. Compensation expense for the performance units is a fixed amount determined at the grant date fair value and is recognized over the primarily three-year award cycle regardless of whether performance units are awarded at the end of the award cycle. Dividends are accrued on a quarterly basis pending achievement of payout criteria and are included in the fair value calculations. Expected price volatility is based on the historical volatility of OGE Energy's common stock for the past three years and was simulated using the Geometric Brownian Motion process. The risk-free interest rate for the performance unit grants is based on the three-year U.S. Treasury yield curve in effect at the time of the grant. The expected life of the units is based on the non-vested period since inception of the award cycle. There are no post-vesting restrictions related to OGE Energy's performance units based on total shareholder return. The number of performance units granted based on total shareholder return and the assumptions used to calculate the grant date fair value of the performance units based on total shareholder return are shown in the following table.
 201920182017
Number of units granted to OG&E employees68,396  91,940  85,501  
Fair value of units granted$47.00  $36.86  $41.76  
Expected dividend yield4.0 %3.6 %3.8 %
Expected price volatility17.0 %19.0 %19.8 %
Risk-free interest rate2.47 %2.38 %1.46 %
Expected life of units (in years)
2.862.862.86

Performance Units – Earnings Per Share
 
The fair value of the performance units based on earnings per share is based on grant date fair value which is equivalent to the price of one share of OGE Energy's common stock on the date of grant. The fair value of performance units based on earnings per share varies as the number of performance units that will vest is based on the grant date fair value of the units and the probable outcome of the performance condition. OGE Energy reassesses at each reporting date whether achievement of the performance condition is probable and accrues compensation expense if and when achievement of the performance condition is probable. As a result, the compensation expense recognized for these performance units can vary from period to period. There are no post-vesting restrictions related to OGE Energy's performance units based on earnings per share. In 2019, the Compensation Committee of OGE Energy's Board of Directors voted to grant restricted stock units in lieu of performance units based on earnings per share. For 2018 and 2017, the number of performance units granted based on earnings per share and the grant date fair value are shown in the following table.
20182017
Number of units granted to OG&E employees30,649  28,499  
Fair value of units granted$31.03  $34.83  

Restricted Stock Units
 
Under the Stock Incentive Plan, OGE Energy has issued restricted stock units to certain existing non-officer employees as well as other executives upon hire to attract and retain individuals to be competitive in the marketplace, and for the 2019 grant cycle, restricted stock units were granted in lieu of performance units based on earnings per share. The restricted stock units vest primarily in a three-year award cycle (i.e., three-year cliff vesting period). Prior to vesting, each restricted stock unit is subject to forfeiture if the recipient ceases to render substantial services to OGE Energy or a subsidiary. These restricted stock units may not be sold, assigned, transferred or pledged and are subject to a risk of forfeiture.

The fair value of the restricted stock units was based on the closing market price of OGE Energy's common stock on the grant date. Compensation expense for the restricted stock units is a fixed amount determined at the grant date fair value and is recognized as services are rendered by employees over a primarily three-year vesting period. Also, for those restricted stock units that vest in one-third annual increments over a three-year cycle, OG&E treats its restricted stock units as multiple separate awards by recording compensation expense separately for each tranche whereby a substantial portion of the expense is recognized in the earlier years in the requisite service period.
Dividends will only be paid on restricted stock unit awards that vest; therefore, only the present value of dividends expected to vest are included in the fair value calculations. The expected life of the restricted stock units is based on the non-vested period since inception of the primarily three-year award cycle. There are no post-vesting restrictions related to OGE Energy's restricted stock units. In 2019, 26,141 restricted stock units were granted to OG&E employees at a fair value of $41.63. There were no restricted stock unit grants made to OG&E employees during 2018 or 2017.

Performance Units and Restricted Stock Units Activity

A summary of the activity for OGE Energy's performance units and restricted stock units applicable to OG&E's employees at December 31, 2019 and changes in 2019 are shown in the following table.
Performance UnitsRestricted
Stock Units
Total Shareholder ReturnEarnings Per Share
(Dollars in millions)Number
of Units
Aggregate Intrinsic ValueNumber
of Units
Aggregate Intrinsic ValueNumber
of Shares
Aggregate Intrinsic Value
Units/shares outstanding at 12/31/18261,423  87,143  312  
Granted68,396  (A) —  26,141  
Converted(95,593) (B) $7.0  (31,865) (B) $2.5  N/A  
VestedN/A  N/A  (312) $—  
Forfeited(10,360) (2,207) (1,500) 
Employee migration3,813  (C) 906  (C) 364  (C) 
Units/shares outstanding at 12/31/19227,679  $12.2  53,977  $4.0  25,005  $1.1  
Units/shares fully vested at 12/31/1977,799  $4.0  25,931  $2.3  
(A)For performance units, this represents the target number of performance units granted. Actual number of performance units earned, if any, is dependent upon performance and may range from zero percent to 200 percent of the target.
(B)These amounts represent performance units that vested at December 31, 2018 which were settled in February 2019.
(C)Due to certain employees transferring between OG&E and OGE Energy.

A summary of the activity for OGE Energy's non-vested performance units and restricted stock units applicable to OG&E's employees at December 31, 2019 and changes in 2019 are shown in the following table. 
Performance UnitsRestricted
Stock Units
Total Shareholder ReturnEarnings Per Share
Number
of Units
Weighted-Average
Grant Date
Fair Value
Number
of Units
Weighted-Average
Grant Date
Fair Value
Number
of Shares
Weighted-Average
Grant Date
Fair Value
Units/shares non-vested at 12/31/18165,830  $39.17  55,278  $32.82  312  $31.88  
Granted68,396  (A) $47.00  —  $—  26,141  $41.63  
Vested(77,799) $41.76  (25,931) $34.83  (312) $31.88  
Forfeited(10,360) $41.33  (2,207) $32.02  (1,500) $41.78  
Employee migration3,813  (B) $41.43  906  (B) $32.84  364  (B) $41.78  
Units/shares non-vested at 12/31/19149,880  $41.31  28,046  $31.03  25,005  $41.62  
Units/shares expected to vest145,790  (C) 28,006  (C) 20,251  (C) 
(A)For performance units, this represents the target number of performance units granted. Actual number of performance units earned, if any, is dependent upon performance and may range from zero percent to 200 percent of the target.
(B)Due to certain employees transferring between OG&E and OGE Energy.
(C)The intrinsic value of the performance units based on total shareholder return and earnings per share is $8.1 million and $1.7 million, respectively. The intrinsic value of restricted stock units is $0.9 million.
Fair Value of Vested Performance Units and Restricted Stock Units

A summary of OG&E's fair value for its vested performance units and restricted stock units is shown in the following table.
Year Ended December 31 (In millions)
201920182017
Performance units:
Total shareholder return$3.2  $2.1  $2.3  
Earnings per share$0.9  $1.7  $0.4  
Restricted stock units$—  $—  $0.1  

Unrecognized Compensation Cost

A summary of OG&E's unrecognized compensation cost for its non-vested performance units and restricted stock units and the weighted-average periods over which the compensation cost is expected to be recognized are shown in the following table.
December 31, 2019
Unrecognized Compensation Cost (In millions)
Weighted Average to be Recognized (In years)
Performance units:
Total shareholder return$3.0  1.68
Earnings per share0.3  1.00
Total performance units3.3  
Restricted stock units0.7  2.00
Total unrecognized compensation cost$4.0